Nasdaq Index: AI-Powered Tech Stocks Surge After Fed Cut, Autos Under Pressure

Wall Street Struggles Amid Mixed Sector Performance

Stocks were little changed on Wednesday, with mixed results across key indices. The benchmark S&P 500 hovered near the flatline, the tech-heavy Nasdaq Composite added 0.31%, while the Blue Chip Dow Jones Industrial Average fell 134 points, or 0.32%. Despite hitting intraday records, fears of a slowing economy persist after last week’s Federal Reserve rate cut. All major indices remain on track for positive September gains, but economic uncertainty is creating headwinds.

Technology and Auto Sectors Diverge

The technology sector saw gains, highlighted by Hewlett Packard Enterprise’s 5% rise following a bullish upgrade from Barclays. The firm cited growing demand for AI-powered data centers as a major driver of growth. However, German software giant SAP slipped more than 2% as news broke of a U.S. Department of Justice investigation, casting a shadow over the company’s legal outlook.

In contrast, the auto sector experienced sharp losses, with General Motors tumbling 6% after Morgan Stanley downgraded the stock to underweight. Analyst Adam Jonas pointed to weakening U.S. consumer credit and intensifying competition from China as significant risks to the automaker’s profitability. The downgrade also dragged down Ford Motor, which dropped 3% as Morgan Stanley adjusted its rating from overweight to equal weight.

Crypto and Homebuilder Stocks Slide

Coinbase, after a six-day rally, saw its stock dip 1% in premarket trading as analysts warned of a potential downtrend. Chart watchers noted that the crypto exchange’s 50-day moving average had crossed below its 200-day average, signaling possible weakness ahead.

In the homebuilder sector, KB Home’s stock plummeted more than 6% after reporting disappointing fiscal third-quarter earnings. The company posted earnings of $2.04 per share, missing estimates by 2 cents, and reported a drop in year-over-year housing gross margins. Rising costs and a softer housing market contributed to the lackluster results, weighing on the broader housing sector.

Sector Performances Show Broader Market Weakness

Most major sectors showed weakness on Wednesday. Consumer discretionary, consumer staples, and financials each posted moderate losses. The energy sector fell by 0.82%, while health care was down 0.72%, reflecting broader concerns about the economy’s growth trajectory. The technology sector, by contrast, gained 0.76%, buoyed by strength in AI-driven demand. Communication services also saw gains, rising 0.38% as tech-related stocks continued to outperform other sectors.

Outlook: Volatility Expected as Economic Data Looms

Looking ahead, market volatility is expected to persist as traders digest mixed economic signals. The decline in new home sales, down 4.7% in August, along with weaker-than-expected corporate earnings, points to potential headwinds. Investors will be closely watching Thursday’s jobless claims report, which could further clarify the labor market’s strength.

In the near term, expect technology stocks to continue outperforming, while sectors sensitive to consumer demand and economic growth, like housing and autos, may face further downside pressure.